MONEY & MEDICINE; Another Terror Victim: Health Care

LONG before the economy started to sink, before terrorists crashed planes into the World Trade Center and the Pentagon, before Cipro became part of the popular trademark lexicon, American health care had major problems. Now there are new twists.

In New York, hospitals are reeling from the financial losses incurred after the attacks. Many of them made purchases to care for patients who, sadly, never came out of the World Trade Center. Hospitals also lost revenue when many patients canceled elective surgeries and other procedures immediately after the attacks.

Especially hurt are hospitals close to ground zero, but others lost equipment and supplies in the rubble, too. And hospitals around the country have also been enduring financial blows.

''We have heard about volume drops immediately post-Sept. 11 across the country as elective surgeries dipped,'' said Martin Arrick, a director at Standard & Poor's. Referring to the Federal Emergency Management Agency, he added: ''In New York City, many hospitals have costs that are expected to be reimbursed by FEMA or other grants. However, no one expects that volume lost over the long term will be recovered if patients feel they do not want to travel into Manhattan for care. This is certainly unknown right now.''

National issues have cropped up as well. The climb in unemployment has contributed to an increase in the number of uninsured Americans -- and just as the federal government was making progress in reducing their ranks.

According to a recent report by the Commonwealth Fund, 37 percent of unemployed people are uninsured, and more than one-third of the workers who lose their jobs lose their health insurance. The uninsured rate among unemployed adults is nearly three times as high as it is in the general population -- 37 percent versus 14 percent, according to the report. And many of the uninsured will undoubtedly find the cost of buying individual health insurance prohibitive.

Medicaid is an option for some of them, but that raises costs for states and cities, which help foot the bill. The Commonwealth Fund study asserts that an increase of two percentage points in the unemployment rate could add some 3.3 million people to Medicaid under current eligibility rules, at a cost of $5 billion for one year.

The government is finding itself with new and, in some cases, unexpected increases in health care costs. In New York City and New York State, health departments have spent millions to augment laboratories and to pay staff members to work around the clock to analyze samples and to perform other public health tasks. New York City has spent about $8 million since Sept. 11 -- all at a time when Mayor Rudolph W. Giuliani is calling for cuts of up to 15 percent per agency in the city's budget.

The Centers for Disease Control and Prevention has also devoted many staff hours to dealing with the anthrax issue. Some analysts predict that states affected by the anthrax attack may face increases of 2 percent to 8 percent in health care costs as a result. Also on the federal agenda is the development of new antibiotics, and possibly vaccines, to deal with bioterrorism threats. The government and the private sector can be expected to go head to head over who will bear those costs.

''Nationally, health care costs, broadly defined, will go up somewhat as costs of security rise and emergency-preparedness costs rise.'' Mr. Arrick said. ''This would be general readiness as well as bioterrorism preparedness, and would include additional costs for stockpiling of medicines, staff training costs, large numbers of requests for screening of potentially fatal illness.''

''Certainly, public health expenditures will rise,'' he added. ''This is a traditionally underfunded sector.''

MENTAL health costs are also climbing, with percentage increases possibly reaching double-digits for cities and companies across the nation, but especially in the Northeast. Many employees are seeking these benefits, analysts and consultants say, and New York City has offered them free to anyone who wants them. Some therapists, however, are providing services pro bono.

All of this comes at a time when insurance premiums were already on the rise. In many cases, workers are looking at having to pick up some of those costs, and premium increases for some companies are now more than 15 percent.

Congress and local leaders will have to consider whether revamping the public health system and increasingly reimbursements to hospitals under government insurance programs are now part of the war on terrorism. It will be interesting to watch.